London ends higher; Lloyds, RBS rebound

BAE shares boosted as board raises dividend, announces buyback

MADRID (MarketWatch) — London stocks reversed earlier losses Thursday to end with modest gains, boosted as Wall Street took a breather from the political stalemate over the U.S. government’s debt limit and as banks rebounded from recent weakness.

The FTSE 100 index (UKX) rose 16.63 points, or 0.3%, to close at 5,873.21, pivoting off a 1.2% drop seen in the prior session, the biggest percentage decline since July 18.

Worries over the U.S. debt limit and a potential default or downgrade had weighed on markets in early action.

Later, Wall Street posted gains as investors turned their attention to a drop in weekly U.S. jobless claims.

In London, support came “from an unlikely place as the banking sector benefits from some short-term bargain hunting,” said Will Hedden, sales trader at IG Index. “However, it would not be a surprise for this to change should the U.S. default become a reality next week.”

Shares of heavyweight Lloyds (LLOY)
LYG, -1.57%
rallied 4.1%, while Royal Bank of Scotland Group PLC
RBS, -1.96%
(RBS) rose 3.6%. Banking shares have lost ground this week in step with European financials.

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Among other notable gainers in London, shares of BAE Systems (BA.) rose 4.9%. First-half net profit fell after the company took a one-off charge, but BAE’s board lifted its dividend by 7.1% and announced a share-buyback program worth 500 million pounds ($817 million).

Shares of telecommunications provider BT Group PLC
BT, -1.22%
(BT.A) also rose, up 3.8%. First-quarter results showed a higher net profit, with the group saying it’s confident of meeting its full-year forecast as well.

Sector heavyweight Xstrata PLC (XTA) also traded down, off 1.3%. The company announced it will buy privately held First Coal Corp. of Canada for $153 million.

Away from London’s main index, shares of National Express PLC (NEX) jumped 4.4%. As its first-half profit surged, the transport group said it expects to see “good organic growth” in passenger numbers ahead.

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